Traders bet on drop this week.
$50.50 put options expiring on Friday, January 24th, on Advanced Micro Devices (AMD) saw a 43-fold rise in volume, going from 102 open contracts to over 4,350 trade hands.
The bet is that shares will fall about 1 percent from their price near $50.95 in the next four trading days.
- 250 Stocks to Sell Now
Investing legend Louis Navellier’s list of toxic stocks includes dozens of big-name blue chips… former Wall Street darlings…
And even stocks in industries that are considered “safe,” like banks and utilities.
Time is running out to make sure you don’t own any of these “SELL”-rated stocks.
The option buyer paid $0.73 on average per contract, so shares would need to decline under $49.75 for the buyer to profit at expiration.
Shares of Advanced Micro Devices have had a stellar year with a 151 percent gain. That gain shows little sign of a slowdown after the company recently unveiled its latest line of computer chips.
Action to take: The sizeable trade may or may not play out—with so few days remaining and with the trade close to being at-the-money, it could go either way. We prefer options trades that have a higher win probability—and one that have a bigger potential percentage gain when they do win.
We’re still bullish on shares over the long term as we have been in the past, so a January 2021 $60 call looks like a more interesting trade for the likelihood of profits as well as the potential return there. A 20 percent return in shares in 2020 is reasonable, even after the company’s rally last year.
Investors looking to buy have missed out on a great rally already, but should use any weakness under $50 as a reason to pick up shares.